Effect of student loan scheme on future house prices

As is widely rumoured batt o keefe is considering a student loan scheme.
Average debts built up by undergraduate students are estimated to be in the range 20-31K.

independent.ie/national-news … 18082.html

Is this future poison for the Irish property market in 7-10 years time ie average (college educated) individual purchasers will be 20-31k less well off and have less for deposit or reduce ammount of debt they can take on for property purchase.
Average (university educated) couples would be 40-62K lighter.

Any comments?

… and a much more immediate effect on property values in the vicinity of colleges, as those who go to college “for the craic” are removed from the equation, and mickey mouse courses die out from lack of takeup

+1 to that.

On the contrary, experience from the US and UK has shown the opposite, because of the availability of cheap credit more students went to 3rd level, as a result universities expanded to cater for this new market and so did the number of courses, the availability of cheap credit also allowed the universities to increase their tuition fees and student debts spiralled upwards further.

and end up in low-paid work if they’re lucky as apprenticeships aren’t going to pick up again for quite a while. More likely, unemployment or emigration awaits an increasing number of school-leavers.

Simple back of the envelope calculation has 52 weeks x €100 unemployment assistance = €5200 per annum. College fees in the article are to be between €5000 and €7500 for university and 1/3 of that for ITs. IMHO, we’d be better off paying for those who become unemployed to go to further education rather than claim the dole.

Another bullet to the foot :unamused: The government will be giving out free one-way flights next, their intentions are clear enough.

You see that is the alarming thing. Where are the incentives to keep costs down? The government removes itself almost entirely form the roll as financier but do taxes reduce to reflect the reduced demand on government revenue. I fucking doubt it.

In Ireland it seems from oen users posts that more end up in state job post 3rd level.
The taxpayer still foots the bill in the majority of cases if the trend sof the last few years remain.

They may not however and the reduction of credit is all that is important relaly in terms of how this floats as GB has pointed out.

It also made them debt monkeys from the very start of their working lives.

I suspect that student loans for 3rd level fees will impact on property prices in a number of ways;

a) As has already been pointed out, a key cohort of FTB’s (possibly the key cohort as being qualified graduates they are likely to be the highest earners) will now be starting out with significant debts before they can build up a deposit or apply for a mortgage.
b) There is a significant possibility that more potential FTB’s will now have tainted credit histories before applying for a mortgage. Missing a payment or two on the student loan will be a black mark, thus reducing their borrowing options or maximum amounts.
c) In the event that the economy does no pick up in the medium term (less than 10 years out), I would suggest that, aside from the traditional drivers for emigration and desire to work and improve ones lot amongst the cohort, the addition of significant debt and the banks looking for payment will drive even more graduates(and also those who do not successfully qualify) out of the country.

So, potentially we are looking at taking a key and significant group in the FTB grouping (possibly the highest earners in the group), saddling them with debts before they can build a deposit, reducing the amounts they can borrow (even with clean credit ratings some will still carry a debt when applying for a mortgage) and, in a worst case scenario (which isn’t too far from likely), providing further impetus for them to leave the State and thus reduce the population and demand for property.

Sounds to me like something that should have been implemented during the bubble years to calm the market.

Blue Horseshoe

I studied abroad so didn’t get any handouts from the Govt and came back to Ireland €20k+ in debt after college. I came back, rented a place, got a job and paid off the debt within 3 years. It’s a bit much to suggest that my peers were saving for a deposit for a house. Straight out of college they were renting and spending their pay in the pub or elsewhere, they sure as hell weren’t saving it anyway. If anything, getting experience of debt good and early taught me how important it was to manage it properly.

Paying off my loans early meant I built a good realtionship with the bank manager who pulled a few strings and made it far easier to get a mortgage. Others I know went to the bank with no savings and no track record of managing debt and found it a lot harded to get a mortage (even when the banks were throwing money at people) with the result that I bought my first place before any them

Aren’t you marvellous!

Fine when you were the minority. What will happen when the cohort who rented and drank straight out of college get their hands on 20 grand of debt.
.
Drinks on a friday night or loan repayment?? Ah to hell with it the government know i’m good for it.

Smelly Socks - thanks, my mother tells me that a lot too but I never believe her, maybe she is right after all.

You can post all the theory you want here and talk about how student loans will cause prices to fall. I simply posted my story which suggest it might not be so clear cut. Apologies if you only want to read posts claiming that this will can only cause prices to fall further but there’s no harm adding a bit of reality to the discussion every now and again.

Finnie, my point was that after leaving college you tend to spend every penny you earn, do you really think that deposits, mortgages etc are high on your list of priorities???

less of this. it reads like your getting a dig in.

if so, cut it out.

I assume this refers to the introduction of a similar student loan arrangment (be it public or private) in those coutnries GB? What was the fee situation prior to the introduction of loans? Was 3rd level it universally “free” prior to their introduction?

Esselte,

What you describe is an exemplary model of how to manage a debt, however, I would suggest that it is not indicative of the majority of your peers, average FTB’s or wider society.

As you are obviously aware, in the case of those who in coming years, following the introduction of a student loans regime, wanted to save for a deposit, they would have to contend with clearing the debt either first or in parallel with saving while also dealing with the cost of living (both on basics and just attempting to “have a life”). This will of course impact on just how much they can save each year and also on how long it takes to build a necessary deposit as a percentage of their intended purchase.

Then, don’t forget the negative impact of any late or missed payments on their credit rating and the effect that will have on borrowing ability.

Remember also, that we are now operating under very changed lending conditions from those experienced recently.

Such a scheme will, IMHO, undoubtedly place a significant drag on property prices. It would be at best wildly optimistic and bullish on the wider property market to suggest that placing financial burdens on the potentially highest earning cohort within the FTB group would not impact negatively on prices. At the very least, it will delay many potential FTB’s entering into the market as they clear their debts. In the extreme, it may be further incentivising many to leave the country if the economy doesn’t improve and they are finding it difficult to service their debts. In the middle, many through their own actions will damage their credit ratings.

Blue Horseshoe

Anyone got links to study of trends in the UK after student loans were introduced?

Blue Horseshoe – while what I did might not be the norm here it certainly is in the UK.

I would query what impact this will have as despite taking on debt at university, far from being saddle with it for years or emigrating, on average, people in the UK marry, buy their first home and start families at a younger age than Irish people.

Otehr way around according to Wiki

en.wikipedia.org/wiki/Age_at_fir … age#Europe

Looking at the story theres a few things that jump from the page.

  1. Screw the next generation. Plenty of people here remark how the next generation was screwed over on property… maybe watching this unfold will help show it wasn’t a generational conspiracy, else its now your turn to shout stop.
  2. Difference in costs, no attempt being made to encourage people to do degrees with technical qualifications those doing arts for example debts of 21k while those doing engineering was about 50% more. What state funding is going to education/industrial policy qangos? Because this shows they are wanking shops.
  3. No attempt made to justify costs or look at value. Sadly is typical of the protected sectors everywhere. In return for this is the taxpayer going to stop all funding to 3’rd level? Who is ‘setting’ the fees? Are students funding their own education or paying over the odds for staff or even worse funding some other sector in the university?

The sums of money being raised are enormous, 8 students in effect should be able to pay a good salary in a university given the fees and a typical 4 year degree. Where is the value for money?

Good points MadPad.

TBH, since fees have not been curtailed by market forces over the last decade or so, I would guess that they have shot up.

I remember paying around 2K punts for a year in Science in UCD circa 1994. I wonder what it is now?